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VOL. 392, NOVEMBER 18, 2002 9

Commissioner of Internal Revenue vs. Leal

*
G.R. No. 113459. November 18, 2002.

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs. JOSEFINA LEAL, respondent.

Remedial Law; Certiorari; Court’s original jurisdiction to

issue the extraordinary writ of certiorari (as well as the writs of
prohibition, mandamus, quo warranto, and habeas corpus) is not
exclusive but is concurrent with the Court of Appeals and the
Regional Trial Courts.—Petitioner’s contention is meritorious.
The Court of Appeals erred in holding that it has no jurisdiction
over petitioner’s special civil action for certiorari under Rule 65 of
the Rules. While this Court exercises original jurisdiction to issue
the extraordinary writ of certiorari (as well as the writs of
prohibition, mandamus, quo warranto, and habeas corpus), such
power is not exclusive to this Court but is concurrent with the
Court of Appeals and the Regional Trial Courts.
Same; Same; The concurrence of jurisdiction does not mean
that the party seeking any of the extraordinary writs has the
absolute freedom to file his petition in the court of his choice; A
direct invocation of the Court’s original jurisdiction to issue these
writs should be allowed only where there are special and
important reasons therefor, specifically and sufficiently set forth in
the petition.—Such concurrence of original jurisdiction among the
Regional Trial Court, the Court of Appeals and this Court,
however, does not mean that the party seeking any of the
extraordinary writs has the absolute freedom to file his petition in
the court of his choice. The hierarchy of courts in our judicial
system determines the appropriate forum for these petitions.
Thus, petitions for the issuance of the said writs against the first
level (inferior) courts must be filed with the Regional Trial Court
and those against the latter, with the Court of Appeals. A direct
invocation of this Court’s original jurisdiction to issue these writs
should be allowed only where there are special and important
reasons therefor, specifically and sufficiently set forth in the
petition. This is the established policy to prevent inordinate
demands upon the Court’s time and attention, which are better

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devoted to matters within its exclusive jurisdiction, and to

prevent further over-crowding of the Court’s docket. Thus, it was
proper for petitioner to institute the special civil action for
certiorari with the Court of Appeals assailing the RTC order
denying his motion to dismiss based on lack of jurisdiction.

_______________

* THIRD DIVISION.

10

10 SUPREME COURT REPORTS ANNOTATED

Commissioner of Internal Revenue vs. Leal

Same; Same; The jurisdiction to review the rulings of the

Commissioner of Internal Revenue pertains to the Court of Tax
Appeals, not to the Regional Trial Court.—While the Court of
Appeals correctly took cognizance of the petition for certiorari,
however, let it be stressed that the jurisdiction to review the
rulings of the Commissioner of Internal Revenue pertains to the
Court of Tax Appeals, not to the RTC. The questioned RMO No.
15-91 and RMC No. 43-91 are actually rulings or opinions of the
Commissioner implementing the Tax Code on the taxability of
pawnshops.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     The Solicitor General for petitioner.
     Jose F. Gonzalez for private respondent.

SANDOVAL-GUTIERREZ, J.:
1
Pursuant to Section 116 of Presidential Decree No. 1158,
(The National Internal Revenue Code of 1977, as amended
[Tax Code for brevity]), which provides:

“SEC. 116. Percentage tax on dealers in securities; lending

investors.—Dealers in securities shall pay a tax equivalent to six
(6%) per centum of their gross income. Lending investors shall
pay a tax equivalent to five (5%) per cent of their gross income.”
(emphasis added)

the Commissioner of Internal Revenue, petitioner, issued

Revenue Memorandum Order (RMO) No. 15-91 dated
2
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2
March 11, 1991, imposing 5% lending investor’s tax on
pawnshops based on their gross income and requiring all
investigating units of the Bureau of Internal Revenue
(BIR) to investigate and assess the lending investor’s tax
due from them. The issuance of RMO No. 15-91 was an
offshoot of petitioner’s evaluation that the nature of
pawnshop

_______________

1 A Decree which consolidated and codified all the internal revenue

laws of the Philippines into a single tax code known as the National
Internal Revenue Code of 1977.
2 Annex “B” of Petition for Certiorari, Rollo, at 51-52.

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VOL. 392, NOVEMBER 18, 2002 11

Commissioner of Internal Revenue vs. Leal

business is akin to that of “lending investors,” which term

is defined in Section 157 (u) of the Tax Code in this wise:

“(u) Lending investors include all persons who make a practice of

lending money for themselves or others at interests.”

Subsequently, petitioner issued Revenue Memorandum 3

Circular (RMC) No. 43-91 dated May 27, 1992, subjecting
the pawn ticket to the documentary stamp tax as
prescribed in Title VII of the Tax Code.
Adversely affected by those revenue orders, herein
respondent Josefina Leal, owner and operator of Josefina’s
Pawnshop in San Mateo, Rizal, asked for a reconsideration
of both RMO No. 15-91 and RMC No. 43-91 but the same
was denied with finality by petitioner
4
in its BIR Ruling No.
221-91 dated October 30, 1991.
Consequently, on March 18, 1992, respondent filed with
the Regional Trial Court (RTC), Branch 75, San Mateo,
Rizal, a5 petition for prohibition, docketed as Civil Case No.
849-92, seeking to prohibit petitioner from implementing
the revenue orders.
Petitioner, through the 6
Office of the Solicitor General,
filed a motion to dismiss the petition on the ground that
the RTC has no jurisdiction to review the questioned
revenue orders and to enjoin their implementation.
Petitioner contends that the subject revenue orders were
issued pursuant to his power “to make rulings or opinions
in connection with the implementation of the provisions of
7
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7
internal revenue laws.” Thus, the case falls within the
exclusive appellate jurisdiction of the Court of
8
Tax Appeals,
citing Section 7 (1) of Republic Act No. 1125.

_______________

3 Annex “C,” id., at 53-54.

4 Motion to Dismiss, Rollo, at 71.
5 Annex “D,” supra, at 55-68.
6 Annex “E,” id., at 69-82.
7 Section 245, National Internal Revenue Code of 1977.
8 Enacted on June 16, 1954, Section 7 provides: “Sec. 7. Jurisdiction.—
The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, x x x—(1) Decisions of the Commissioner of Internal
Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto,

12

12 SUPREME COURT REPORTS ANNOTATED

Commissioner of Internal Revenue vs. Leal

The9 RTC, through then Presiding Judge 10

Andres B. Reyes,
Jr., issued an order on April 27, 1992 denying the motion
to dismiss, holding that the revenue orders are not
assessments to implement a Tax Code provision, but are “in
effect new taxes (against pawnshops) which are not
provided for under the Code,” and which only Congress is
empowered to impose.
Petitioner then filed with the Court of Appeals a petition
for certiorari and prohibition under Rule 65 of the Revised
Rules of Court (now 1997 Rules of Civil Procedure, as
amended), docketed as CA-G.R. SP No. 28824. Petitioner
alleged that in denying the motion to dismiss, the RTC
Judge acted without or in excess of his jurisdiction, or with
grave abuse of discretion. In its Decision dated December
23, 1993, the Court of11
Appeals dismissed the petition “for
lack of legal basis” and ruled that “the (RTC) order
denying the motion to dismiss is subject to immediate
challenge before the Supreme Court (not the Court of
Appeals), which is the sole authority to determine and
resolve an issue purely of law pursuant
12
to Section 5, Article
VIII of the 1987 Constitution.” Nonetheless, the Court of
Appeals resolved the case on the merits, sustaining the
RTC ruling that the questioned revenue orders are “new
additional13
measures which only Congress is empowered to
impose.”

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Hence, the instant petition for review on certiorari

under Rule 45 of the Rules of Court raising the following
issues:

1. WHETHER THE COURT OF APPEALS HAS

JURISDICTION OVER A PETITION FOR
CERTIORARI UNDER RULE 65 OF THE RULES
OF COURT WHERE THE AUTHORITY OF THE
REGIONAL TRIAL COURT TO REVIEW THE
SUBJECT REVENUE ORDERS IS BEING
QUESTIONED;

_______________

or other matters arising under the National Internal Revenue Code or

other law or part of law administered by the Bureau of Internal Revenue; x
x x.” (emphasis added).
9 Now Associate Justice of the Court of Appeals.
10 Annex “F,” supra, at 83.
11 Rollo, at 50.
12 Id., at 48.
13 Id., at 49.

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VOL. 392, NOVEMBER 18, 2002 13

Commissioner of Internal Revenue vs. Leal

2. WHETHER IT IS THE RTC OR THE COURT OF

TAX APPEALS WHICH HAS JURISDICTION
OVER THE INSTANT CASE.

Anent the first issue, petitioner contends that the Court of

Appeals has “original jurisdiction to issue writs of
mandamus, prohibition, certiorari, habeas corpus and quo
warranto, and auxiliary writs or processes, whether or not
in aid of its appellate jurisdiction,” pursuant to Section 9(1)
of Batas Pambansa Blg. 129. Petitioner thus claims that
his petition for certiorari filed with the Court of Appeals
pursuant to Rule 65 of the Rules of Court is the proper
recourse to assail the RTC order denying his motion to
dismiss.
Petitioner’s contention is meritorious. The Court of
Appeals erred in holding that it has no jurisdiction over
petitioner’s special civil action for certiorari under Rule 65
of the Rules. While this Court exercises original
jurisdiction to issue the extraordinary writ of certiorari (as
well as the writs of prohibition, mandamus, quo warranto,
14
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14
and habeas corpus), such power is not exclusive 15
to this
Court but is concurrent16 with the Court of Appeals and the
Regional Trial Courts. We reiterate our pronouncement
17
on
this issue in Morales vs. Court of Appeals.

“Under Section 9 (1) of B.P. Blg. 129, the Court of Appeals has
concurrent original jurisdiction with the Supreme Court pursuant
to Section 5 (1) of Article VIII of the Constitution and Section 17
(1) of the Judiciary Act of 1948, and with the Regional Trial Court
pursuant to Section 21 (1) of B.P. Blg. 129 to issue writs of
certiorari, mandamus, prohibition, habeas corpus, and quo
warranto. These are original actions, not modes of appeals.
“Since what the petitioner filed in CA-G.R. SP No. 40670 was a
special civil action for certiorari under Rule 65, the original
jurisdiction of the Court of Appeals thereon is beyond doubt.

_______________

14 Section 5 (1), Article VIII of the 1987 Constitution.

15 Section 9 (1) of the Judiciary Reorganization Act of 1980 (Batas
Pambansa Blg. 129).
16 Section 21 (1), id.; Section 4, Rule 65, 1997 Rules of Civil Procedure,
as amended; Fortich vs. Corona, 289 SCRA 624, 644-645 (1998).
17 283 SCRA 211, 222 (1997).

14

14 SUPREME COURT REPORTS ANNOTATED

Commissioner of Internal Revenue vs. Leal

“This error of the Court of Appeals was due to its misapplication

of Section 5 (2) (c) of Article VIII of the Constitution and of that
portion of Section 17 of the Judiciary Act of 1948 vesting upon the
Supreme Court exclusive jurisdiction to review, revise, reverse,
modify, or affirm on certiorari as the law or rules of court may
provide, final judgments and decrees of inferior courts in all cases
in which the jurisdiction of any inferior court is in issue. It forgot
that this constitutional and statutory provisions pertain to the
appellate—not original—jurisdiction of the Supreme Court, as
correctly maintained by the petitioner. An appellate jurisdiction
refers to a process which is but a continuation of the original suit,
not a commencement of a new action, such as that of a special civil
action for certiorari. The general rule is that a denial of a motion
to dismiss or to quash in criminal cases is interlocutory and
cannot be the subject of an appeal or of a special civil action for
certiorari. Nevertheless, this Court has allowed a special civil
action for certiorari where a lower court has acted without or in
excess of jurisdiction or with grave abuse of discretion in denying a
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motion to dismiss or to quash. The petitioner believed that the

RTC below did so; hence, the special civil action for certiorari
before the Court of Appeals appeared to be the proper remedy.”
(emphasis added)

Such concurrence of original jurisdiction among the

Regional Trial Court, the Court of Appeals and this Court,
however, does not mean that the party seeking any of the
extraordinary writs has the absolute freedom to file his
petition in the court of his choice. The hierarchy of courts in
our judicial system determines the appropriate forum for
these petitions. Thus, petitions for the issuance of the said
writs against the first level (inferior) courts must be filed
with the Regional Trial Court and those against the latter,
with the Court of Appeals. A direct invocation of this
Court’s original jurisdiction to issue these writs should be
allowed only where there are special and important reasons
therefor, specifically and sufficiently set forth in the
petition. This is the established policy to prevent inordinate
demands upon the Court’s time and attention, which are
better devoted to matters within its exclusive jurisdiction,
and to18 prevent further over-crowding of the Court’s
docket. Thus, it was proper for petitioner to institute the
special civil action for certiorari with the Court of Appeals
assailing the RTC order denying his motion to dismiss
based on lack of jurisdiction.

_______________

18 Fortich vs. Corona, supra (footnote 16), at 645-646, citing People vs.
Cuaresma, supra (footnote 17), at 424.

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VOL. 392, NOVEMBER 18, 2002 15

Commissioner of Internal Revenue vs. Leal

While the Court of Appeals correctly took cognizan ce of the

petition for certiorari, however, let it be stressed that the
jurisdiction to review the rulings of the Commissioner of
Internal Revenue pertains to the Court of Tax Appeals, not
to the RTC.
The questioned RMO No. 15-91 and RMC No. 43-91 are
actually rulings or opinions of the Commissioner
implementing the Tax Code on the taxability of pawnshops.
This is clear from petitioner’s RMO No. 15-91, pertinent
portion of which reads:

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“A restudy of P.D. 114 (the Pawnshop Regulation Act) shows that

the principal activity of pawnshops is lending money at interest
and incidentally accepting a ‘pawn’ of personal property delivered
by the pawner to the pawnee as security for the loan (Sec. 3,
ibid.). Clearly, this makes pawnshop business akin to lending
investor’s business activity which is broad enough to encompass
the business of lending money at interest by any person whether
natural or juridical. Such being the case, pawnshops shall be
subject to the 5% lending investor’s tax based on their gross 19
income pursuant to Section 116 of the Tax Code, as amended.”

Such revenue orders were issued pursuant to petitioner’s

powers under Section 245 of the Tax Code, which states:

“SEC. 245. Authority of the Secretary of Finance to promulgate

rules and regulations.—The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all
needful rules and regulations for the effective enforcement of the
provisions of this Code.
“The authority of the Secretary of Finance to determine articles
similar or analogous to those subject to a rate of sales tax under
certain category enumerated in Sections 163 and 165 of this Code
shall be without prejudice to the power of the Commissioner of
Internal Revenue to make rulings or opinions in connection with
the implementation of the provisions of internal revenue laws,
including ruling on the classification of articles of sales and
similar purposes.” (emphasis added)

Under Republic Act No. 1125 (An Act Creating the Court of
Tax Appeals [CTA for brevity]), as amended, such rulings
of the Commissioner of Internal Revenue are appealable to
that court, thus:

_______________

19 Rollo, at 52.

16

16 SUPREME COURT REPORTS ANNOTATED

Commissioner of Internal Revenue vs. Leal

“SEC. 7. Jurisdiction.—The Court of Tax Appeals shall exercise

exclusive appellate jurisdiction to review by appeal, as herein
provided—
(1) Decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto,
or other matters arising under the National Internal Revenue Code
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or other laws or part of law administered by the Bureau of

Internal Revenue;
x x x     x x     x x x.” (emphasis added)
“SEC. 11. Who may appeal; effect of appeal.—Any person,
association or corporation adversely affected by a decision or
ruling of the Commissioner of Internal Revenue, or the
Commissioner of Customs or any provincial or city Board of
Assessment Appeals may file an appeal in the Court of Tax
Appeals within thirty days after the receipt of such decision or
ruling.
x x x     x x     x x x.” (emphasis added)
“SEC. 18. x x x.—No judicial proceedings against the
Government involving matters arising under the National Internal
Revenue Code, the Customs Law or the Assessment Law shall be
maintained, except as herein provided, until and unless an appeal
has been previously filed with the Court of Tax Appeals and
disposed of in accordance with the provisions of this Act.
x x x     x x x     x x x.” (emphasis added)
20
This Court, in Rodriguez, etc. vs. Blaquera, etc., ruled:

“Plaintiff maintains that this is not an appeal from a ruling of the

Collector of Internal Revenue, but merely an attempt to nullify
General Circular No. V-148, which does not adjudicate or settle
any controversy, and that, accordingly, this case is not within the
jurisdiction of the Court of Tax Appeals.
“We find no merit in this pretense. General Circular No. V-148
directs the officers charged with the collection of taxes and license
fees to adhere strictly to the interpretation given by the defendant
to the statutory provisions abovementioned, as set forth in the
Circular. The same incorporates, therefore, a decision of the
Collector of Internal Revenue (now Commissioner of Internal
Revenue) on the manner of enforcement of the said statute, the
administration of which is entrusted by law to the Bureau of
Internal Revenue. As such, it comes within the purview of Republic
Act No. 1125, Section 7 of which provides that the Court of Tax
Appeals ‘shall

_______________

20 109 Phil. 598, 601-602 (1960).

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VOL. 392, NOVEMBER 18, 2002 17

Commissioner of Internal Revenue vs. Leal

exercise exclusive appellate jurisdiction to review by appeal x x x

decisions of the Collector of Internal Revenue in x x x matters
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arising under the National Internal Revenue Code or other law or

part of the law administered by the Bureau of Internal Revenue.’ x
x x.” (emphasis added)

In the same vein,

21
we held in Meralco Securities Corporation
vs. Savellano, thus:

“Respondent judge has no jurisdiction to take cognizance of the

case because the subject matter thereof clearly falls within the
scope of cases now exclusively within the jurisdicti on of the Court
of Tax Appeals. Section 7 of Republic Act No. 1125, enacted June
16, 1954, granted to the Court of Tax Appeals exclusive appellate
jurisdiction to review by appeal, among others, decisions of the
Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law or
part of law administered by the Bureau of Internal Revenue. The
law transferred to the Court of Tax Appeals jurisdiction over all
cases involving said assessments previously cognizable by Courts
of First Instance, and even those already pending in said courts.
The question of whether or not to impose a deficiency tax
assessment on Meralco Securities Corporation undoubtedly comes
within the purview of the words “disputed assessments” or of
“other matters arising under the National Internal Revenue Code.
. . .” In the case of Blaquera, etc. vs. Rodriguez, etc. (103 Phil. 511
[1958]), this Court ruled that ‘the determination of the correctness
or incorrectness of a tax assessment to which the taxpayer is not
agreeable, falls within the jurisdiction of the Court of Tax Appeals
and not of the Court of First Instance, for under the provisions of
Section 7 of Republic Act No. 1125, the Court of Tax Appeals has
exclusive appellate jurisdiction to review, on appeal, any decision
of the Collector of Internal Revenue in cases involving disputed
assessments and other matters arising under the National Internal
Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue.’ ”

Here, as earlier mentioned, respondent Josefina Leal, being

a pawnshop owner, is assailing the revenue orders
imposing 5% lending investor’s tax on pawnshops issued by
petitioner. Clearly then, she should have filed her petition
with the Court of Tax

_______________

21 117 SCRA 804, 809-810 (1982).

18

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18 SUPREME COURT REPORTS ANNOTATED

People vs. Morano

Appeals, not the RTC. Indeed, the Court of Appeals erred

in holding that the RTC order should have been challenged
before this Court.
WHEREFORE, the petition is GRANTED. Accordingly:
(1) the assailed Decision dated December 23, 1993 of the
Court of Appeals in CA-G.R. SP No. 28824 is SET ASIDE;
(2) the Order dated April 27, 1992 and the Writ of
Preliminary Injunction dated May 21, 1992 both issued by
the RTC, Branch 75, San Mateo, Rizal in Civil Case No.
849-92, are declared NULL and VOID for having been
issued without jurisdiction; and (3) Civil Case No. 849-92 is
ordered DISMISSED.
SO ORDERED.

     Puno (Chairman), Panganiban, Corona and Carpio-

Morales, JJ., concur.

Petition granted, judgment set aside.

Note.—The Supreme Court has the full discretionary

power to take cognizance of the petition filed directly to it if
compelling reasons or the nature and importance of the
issues raised warrant. (Malonzo vs. Zamora, 311 SCRA 224
[1999])

——o0o——

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